(Truly regrettable metaphor. And remember, payday lending references always help you get promoted. – promoted by Colorado Pols)
More and more Colorado lawmakers are getting a handle on the harmful impact of payday lending.
You borrow money in an emergency. And then you can get in trouble.
That simple explanation parallels the experience of many hard-working Coloradans who have paid millions of dollars in excessive fees to payday lenders.
Rep. Steve King, R-Grand Junction, is facing an ethics violation over alleged improper use of his campaign funds.
A colleague, Rep. Mark Waller, came to his defense, explaining that King had car problems and didn’t have $1,025 to rent a car. “He says, ‘Let me borrow from the campaign account,’ ” explained Waller, R-Colorado Springs.
“It’s a payday loan from the campaign account,” Waller said.
Waller understands the insidious hook used by the payday industry: When you get in a jam, go to a payday lender. They are on practically every corner — operating more stores than McDonald’s and Starbucks combined.
But if King had gone to a real payday lender, he would have had to take out two loans for the maximum of $500 each. That would have cost him $150.
King wasn’t reimbursed for about two months. That means he would have had to renew his loans every two weeks. Remember, no partial payments with payday loans; it’s pay in full or take out another loan.
King would have gone back to his payday lenders four times, and in the end, he would have paid $750 to borrow $1,000.
In that sense, King would have been a pretty typical borrower. In Colorado, one-third of payday customers take out multiple loans, and an average user ends up in debt for six months.
But King is not like most Colorado payday victims. He could tap his campaign fund.
Coloradans who work hard to make ends meet, or who get by on a fixed income — they don’t have a campaign fund as a backstop.
Many of them turn to payday lenders who, under the law, can charge fees equivalent to 521% interest APR. All because Colorado lawmakers opened a loophole in 2000 and allowed payday lenders to operate outside of the state’s usury laws.
Last month, House Minority Leader Mike May said the state “cannot continue to use payday-loan-like policies” in trying to fix the state’s budget mess.
One by one, lawmakers seem to be getting a grasp of harm caused by payday lending.